Hall v Woolston Hall Leisure Ltd

An employee's statutory claim for sex discrimination is not defeated merely because the employer has performed an otherwise lawful employment contract illegally. Illegality bars a tortious claim only where the claim is causally connected with, or inextricably bound up with, the claimant's own unlawful conduct, so that recovery would appear to condone it.

Mere awareness of an employer's failure to deduct and account for PAYE and national insurance contributions is not active participation in that illegality. A dismissal-discrimination claim is a statutory tort. It does not enforce contractual rights, even though employment and dismissal are factual preconditions to the claim.

Mrs Hall was dismissed from her post as head chef after her employer learned that she was pregnant. An Industrial Tribunal found unlawful sex discrimination under the Sex Discrimination Act 1975, but refused compensation for financial loss because her employer had paid part of her agreed net wage through false payslips and she knew of the resulting tax irregularity.

The Employment Appeal Tribunal upheld that refusal: [1998] I.C.R. 651. Mrs Hall appealed. The employer, which had ceased trading, was unrepresented. The central issue was whether the alleged illegality barred compensation for discriminatory dismissal.

1. Appeal allowed unanimously. Lord Justice Peter Gibson, with whom Lord Justice Mance and Mr Justice Moore-Bick agreed, held that the Tribunal and the Employment Appeal Tribunal had adopted the wrong approach. The remedies decision was set aside and the claim was remitted for assessment of compensation.

2. The employment contract was lawful when made and when varied. Illegal performance could disable an employee from enforcing such a contract only where the employee had both knowledge of, and active participation in, the illegality. Mrs Hall queried the false payslips, had no duty to make the employer account for PAYE or national insurance contributions, and did not participate in its scheme. Her passive acquiescence did not amount to unlawful conduct or contractual illegality on her part.

3. In any event, a claim under Sex Discrimination Act 1975 sections 65 and 66 is a statutory tort. Employment and dismissal are factual conditions of a section 6(2) complaint; the claim is founded on discriminatory conduct, not on enforcement of the employment contract. The illegality defence required a causal and inextricable connection between the claimant's own illegality and the discrimination claim. None existed here.

4. The court approved Leighton v Michael [1995] I.C.R. 1091. Construed consistently with the Equal Treatment Directive, the statutory scheme was intended to provide real and effective protection against sex discrimination. The court reserved the wider question whether an extreme form of illegal employment might fall outside the Directive's protection.

• Court of Appeal: Allowed Mrs Hall's appeal, set aside the remedies determination, and remitted the compensation issue to the Industrial Tribunal.
• Employment Appeal Tribunal: Dismissed Mrs Hall's appeal from the remedies determination: [1998] I.C.R. 651.
• Industrial Tribunal: Found pregnancy dismissal to be unlawful sex discrimination, awarded £2,000 for injury to feelings, but refused financial compensation on grounds of illegality.